IMF urges further reform

The IMF has urged Sanaa to continue with its economic reform programme, but warns there is still a long way for the country to go as it seeks to reduce poverty and drive up living standards.

In its latest Article IV consultation with Yemen, published

in late September, the body praises the country's growth record in recent years, which has been helped by high oil prices and favourable global economic conditions.

However, the IMF highlights concerns over the direction of the economy, particularly in the light of falling oil reserves.

'Despite recent progress in poverty reduction, Yemen remains one of the poorest countries in the region and is far from achieving the Millennium Development Goals,' says the report. 'Oil production has been declining since 2000 and, in the absence of major

discoveries, proven oil reserves could actually be depleted in

10 years' time.

'The start of a large liquefied natural gas project

from 2009 will offer only

partial compensation.'

'Yemen faces considerable challenges to generate strong [non-hydrocarbons] growth to absorb the rapidly growing labour force and increase living standards, while also ensuring fiscal and external stability in the context of declining oil reserves,' the report concludes.

The IMF points to fuel

subsidies and the government wage bill as drains on the national budget.

It also stresses the need to rein in inflation, which at present stands at more than

20 per cent.

On the positive side, the IMF notes a reduction in the overall budget deficit and an increase in the central bank's gross reserves to $6,800 million.

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